United States District Court, D. Minnesota
Robert M. Lewis, Esq., United States Attorney's Office, Saint Paul, Minnesota, for Plaintiff.
James E. Ostgard, II, Esq., Ostgard Law Office, Minneapolis, Minnesota, for Defendant.
REPORT & RECOMMENDATION
STEVEN E. RAU, Magistrate Judge.
The above-captioned case came before the undersigned on Defendant Jeffrey A. Gardner's ("Gardner") Motion to Suppress Evidence Obtained as a Result of Search and Seizure ("Motion to Suppress") [Doc. No. 38]. This matter was referred for the resolution of the issues raised in Gardner's Motion to Suppress pursuant to 28 U.S.C. § 636(b)(1)(B)-(C) and District of Minnesota Local Rule 72.1. For the reasons stated below, the Court recommends that the Motion to Suppress be denied.
On February 19, 2013, Gardner was indicted with four counts of mail fraud in violation of 18 U.S.C. § 1341, one count of conspiracy to commit mail fraud in violation of 18 U.S.C. § 371, one count of conspiracy to commit mail and wire fraud in violation of 18 U.S.C. § 1349, and one count of monetary transactions in criminally derived property in violation of 18 U.S.C. § 1957. (Indictment) [Doc. No. 1].
Gardner filed his Motion to Suppress on January 16, 2015. He alleges that there were no grounds for any warrantless searches, and, to the extent any searches were conducted pursuant to a search warrant, the search warrant was inadequate and permitted a general search. (Mot. to Dismiss). Gardner initially requested oral argument, however, he and the United States of America (the "Government") jointly requested that the hearing be cancelled. ( Id. ); (Stipulation Regarding Pretrial Mots.) [Doc. No. 41]. Upon review of the submissions, the Court agreed. (Text Only Entry Dated Feb. 18, 2015) [Doc. No. 46]. After supplemental briefing from the parties, Gardner's Motion to Suppress and non-dispositive pretrial motions were taken under advisement on February 18, 2015. ( Id. ).
Through his supplemental briefing, Gardner narrowed his Motion to Suppress to challenge the search warrants executed on or around December 16, 2008, at a storage unit he rents at Northside Storage, at the offices of his company, Assured Financial ("Assured"), and his residence in Shoreview, Minnesota. (Mem. in Supp. of Mot. to Suppress Evidence Obtained in Search, "Gardner's Mem. in Supp.") [Doc. No. 44 at 1]. All three search warrants were based on the affidavit of Investigator Joe Hunt (the "Hunt Affidavit"). ( Id. ).
The Hunt Affidavit describes a "builder buyout" scheme where a builder can sell excess homes to pay off its financial obligations to its construction lender; this scheme involved the surreptitious routing of money from the seller (builder) to the buyer. The participants provided the buyer an amount greater than the down payment so that the buyer immediately profited anywhere from $5, 000 to $25, 000 per transaction.
The scheme is described in detail using a residence in Maple Lake, Minnesota as an example (the "Property"). The broad strokes are as follows: The construction lender, Assured, loaned money to the builder. The builder sold the Property to the buyers, Arden and Sheila Larsen (the "Larsens"), using broker Dale R. Wurzinger ("Wurzinger") of Split Rock Realty as the facilitator. Washington Mutual was the mortgage lender that relied on the information provided by the Larsens to issue a mortgage. Compass Title closed the purchase and wired a total of $59, 120: $41, 335 to Split Rock Realty and $17, 785 to Split Rock Properties. The Property's settlement statement does not reflect these amounts. Instead, the settlement statement lists the amount Split Rock Realty received as $38, 335, described as a commission, and the amount Split Rock Properties received as $20, 785, described as "Subcontractor Payoff-Const Con." Split Rock Realty then wired $38, 335 to Options Plus Realty, who was listed on the settlement statement but did not receive a commission payment from Compass Title. Options Plus Realty, in turn, wired $36, 840 (the amount of its payment from Split Rock Realty, less a $1, 495 commission for Wurzinger) to the Larsens. Assured does not list Split Rock Properties on its loan payoff report. Washington Mutual, the mortgage lender, was not aware of the transactions described here, and the transactions contradict the statements made on the Property's settlement statement. The Hunt Affidavit states that "[t]hese actions constituted deliberate and material misstatements[, ] which were relied upon by a mortgage lender and meet the requirements for establishing mortgage fraud. They also demonstrate that the [settlement statement] was knowingly signed using false information." (citation omitted).
Gardner argues that the Hunt Affidavit lacks probable cause, the good faith exception does not apply, and the search warrant permits a general search. (Gardner's Mem. in ...